ITO, Bangalore V. Shri. Rinny Eapen, Bangalore

ITA 789/BANG/2011

• Counselvise Citation: 78921114 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR
• Keywords: Capital asset; Capital receipt; Revised return
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.789/BAN G/2011 (ASST. YEAR - 2006-07) THE INCOME-TAX OFFICER, WARD-7(1), BANGALORE. . APPELLANT VS. SHRI RINNY EAPEN, BANGALORE. . RESPONDENT ITA NO.246/BANG/2012 (BY ASSESSEE) REVENUE BY : SHRI BIJOY KUMAR PANDA, ACIT APPELLANT BY : SHRI KIRAN KUMAR, ADVOCATE DATE OF HEARING : 15-11-2012 DATE OF PRONOUNCEMENT : 30-11-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : BOTH THESE CROSS APPEALS ARE FILED BY THE ASSESSEE AS WELL AS THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS ITA NOS.789/B/11 & 246/B/12 2 DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX - (APPEALS) - III AT BANGALORE DATED 09.06.2011. TH E APPEALS ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOM E-TAX ACT, 1961. ITA NO.789/BANG/2011 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL : I. THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN HOLDING THAT THE LAND AT UTTARAHALLI SOLD BY THE ASSESSEE IS NOT A CAPITAL ASSET WITHIN THE MEANING OF SEC. 2(14)(III)(B) OF THE I.T ACT, 1961 AND ACCORDINGLY NO CAPITAL ARISES ON ITS SALE. II. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE WORDS WITHIN SUCH DISTANCE SUED IN SEC. 2(14)(III)(B) APPLY TO THE SHORTEST DISTANCE AND NO T TO DISTANCE COVERED BY AN APPROACH ROAD. III. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE NOTIFICATION NO.9447 DATED 6.1.1994 ALSO EMPHASIZES THE DISTANCE TO THE RECKONED IN ALL DIRECTIONS. IV. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE NOTIFICATION NO.9447 DATED 6.1.1994 DOES NOT ITA NOS.789/B/11 & 246/B/12 3 REQUIRE SUCH DISTANCE TO BE MEASURED THROUGH MOTORABLE ROADS. V. THE CIT(A) HAS RELIED UPON PARTIAL INFORMATION OBTAINED UNDER RTI ACT AND DID NOT VERIFY THE REASO N FOR NON-FILING OF AN APPEAL AGAINST THE ORDER OF TH E HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SATINDER PAL SINGH (188 TM 54). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E AN INDIVIDUAL HAS FILED ITS RETURN OF INCOME ON 29.7.2006 FOR THE RELEVANT ASSESSMENT YEAR ADMITTING THE TOTAL INCOME OF RS.7,94,350/-. INITIALLY THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE INCOME-TA X ACT RESULTING IN A DEMAND OF RS.29,160/-. SUBSEQUENTLY, THE ASSESS EE FILED A REVISED RETURN OF INCOME ON 26.2.2008 REDUCING THE INCOME T O RS.6,48,150/-. DURING THE ASSESSMENT PROCEEDING U/S 143(3) OF THE INCOME-TAX ACT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S SOLD LAND AT UTTARAHALLI AND MEASURING 27 ACRES FOR A CONSIDERA TION OF RS.3.75 CRORES BUT DID NOT OFFER ANY CAPITAL GAIN FROM THE SAID SALE ON THE GROUND THAT THE ASSET SOLD IS AN AGRICULTURAL LAND AND HENCE GAIN IS NOT CHARGEABLE TO TAX AND ALSO THAT THE ASSESSEE CLAIM ED THAT THESE LANDS WERE CONTINUED TO BE PUT TO USE FOR AGRICULTURAL PU RPOSES AND, THEREFORE, EXEMPTION CLAUSE APPLIED. THE AO, HOWEVE R CONSIDERED THE ITA NOS.789/B/11 & 246/B/12 4 PROVISIONS OF SEC. 2(14)(III) AND OBSERVED THAT THE LAND IS COVERED WITHIN THE MUNICIPALITY LIMITS OF UTTARAHALLI WHIC H HAS A POPULATION EXCEEDING 10,000 AS PER CENSUS OF 2001 AND HELD THA T THE LAND IS TO BE TREATED AS URBAN LAND AND FALLS UNDER THE PURVIEW OF THE TERM CAPITAL ASSET. HE THUS BROUGHT THE LONG TERM CAPITAL GAIN TO TAX. 4. AGGRIEVED BY THE SAME, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) STATING THAT THE SHORTEST ROUTE DISTANCE FROM THE MUNICIPALITY LIMITS OF UTTARAHALLI TO THE AGRICULT URAL LAND WAS 8.7 K.M AND, THEREFORE, IT WILL NOT FALL WITHIN THE PURVIEW OF THE CAPITAL ASSET AS DEFINED U/S 2(14)(III)(B) OF THE INCOME-TAX ACT. H E ALSO PLACED RELIANCE UPON THE DECISION OF HONBLE P & H HIGH CO URT IN THE CASE OF SATINDER PAL SINGH REPORTED IN [2010] 1 TM 43 W HEREIN IT WAS HELD THAT FOR THE PURPOSE OF SEC. 2(14)(III)(B) THE SHOR TEST DISTANCE HAS TO BE TAKEN IN TERMS OF APPROACH BY ROAD AND NOT AS PER S TRAIGHT LINE DISTANCE ON A HORIZONTAL PLANE. 5. THE CIT(A) AFTER CONSIDERING THE ASSESSEES SUBM ISSION CALLED FOR A REMAND REPORT. IN THE REMAND REPORT, THE AO OBSERVED THAT FOR AGRICULTURAL LAND TO BE CONSIDERED AS A CAPITAL ASS ET, IT SHOULD NOT BE WITHIN THE RADIUS OF 8 K.M FROM THE MUNICIPALITY LI MITS AND FOR THIS ITA NOS.789/B/11 & 246/B/12 5 PURPOSE, CROWS FLIGHT METHOD HAS TO BE ADOPTED TO DETERMINE THE DISTANCE BETWEEN THE AGRICULTURAL LAND AND THE MUNI CIPALITY LIMITS. HE, THEREFORE, TAKING THE STRAIGHT LINE (CROWS FLI GHT) DISTANCE BY USING GLOBAL POSITIONING SYSTEM MEASURED THE DISTANCE TO BE 7.5 K.M AND HELD THAT IT FALLS WITHIN THE MUNICIPALITY LIMITS. THE CIT(A) AFTER TAKING NOTE OF ASSESSEES SUBMISSIONS AS WELL AS T HE AOS REMAND REPORT 1 AND 2, FOLLOWED THE DECISION OF P & H HIGH COURT IN THE CASE OF SATINDER PAL SINGH (CITED SUPRA) AND HELD THAT THE DISTANCE OF 8.7 K.M BY APPROACH ROAD HAS TO BE TAKEN INTO CONSIDERA TION FOR THE PURPOSE OF SEC. 2(14)(III)(B) OF THE INCOME-TAX ACT . HE ALSO OBSERVED THAT AS PER THE NOTIFICATION NO.9447 ISSUED U/S 2(1 4)(III)(B) DATED 6.119.94, THE DISTANCE WAS 10.6 K.M WHICH HAS TO BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF SEC. 2(14)(III)(B) . THUS HOLDING, HE DELETED THE ADDITION MADE ON ACCOUNT OF CAPITAL GAI NS AND THE REVENUE IS IN APPEAL BEFORE US. 6. THE LEARNED DR SUPPORTED THE ORDERS OF THE AO WH ILE THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDE R OF THE CIT(A) AND ALSO PLACED RELIANCE UPON THE DECISIONS OF THE TRIBUNAL IN THE CASE OF ACIT VS. GAURAV KHANDEWAL IN ITA NO.195 OF 2010 DATED 30.6.91, WHEREIN THE ITAT BENCH AT AGRA TAKING NOTE OF DECISION OF ITA NOS.789/B/11 & 246/B/12 6 HONBE P & H HIGH COURT IN THE CASE OF SATINDER PAL SINGH AND ALSO THAT OF THE TRIBUNAL AT DELHI IN THE CASE OF SHRI H UKMI VS. DCIT IN 259 IN ITA NO.2582/DEL/2004 HAS HELD THAT THE DISTA NCE BY ROAD IS TO BE TAKEN INTO CONSIDERATION FOR THE PURPOSES OF APP LICATION OF PROVISIONS OF SEC. 2(14)(III)(B) OF THE INCOME-TAX ACT. 8. THE REVENUE HAS NOT BEEN ABLE TO REBUT THE FINDI NGS OF THE CIT(A) WITH ANY DECISION TO THE CONTRARY. 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THEIR RIVAL CONTENTIONS, WE FIND THAT THE ISSUE IS SQUARELY COV ERED BY THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR TH E ASSESSEE AND THE CIT(A) HAS ONLY FOLLOWED THE JUDICIAL PRECEDENTS ON THE ISSUE IN GRANTING RELIEF TO THE ASSESSEE. IN VIEW OF THE SA ME, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. ITA NO.246/BANG/2012 10. WE FIND THAT THERE IS A DELAY OF 182 DAYS IN FI LING THE APPEAL BEFORE THE TRIBUNAL AND THE ASSESSEE HAS FILED AFFI DAVIT STATING THE ITA NOS.789/B/11 & 246/B/12 7 REASONS FOR DELAY IN FILING OF THE APPEAL. AS PER THE SAID AFFIDAVIT, THE ASSESSEE IS A SENIOR CITIZEN AGED 67 YEARS AND IS S UFFERING FROM AILMENTS SUCH AS DIABETES, HIGH BLOOD PRESSURE, KID NEY RELATED AILMENTS, DUE TO WHICH HE COULD NOT CONTACT THE ADV OCATE PERSONALLY BUT HE HAD HANDED OVER THE CASE FILES TO HIS SON TO CONTACT THE ADVOCATE, WHICH RESULTED THE DELAY. 11. THE LEARNED DR OPPOSED THE CONDONATION OF THE DELAY. 12. HAVING HEARD BOTH THE PARTIES AND TAKING DUE NO TE OF THE FACTS CITED IN THE AFFIDAVIT, WE ARE INCLINED TO CONDONE THE DELAY OF 182 DAYS AND ADMIT THE APPEAL. 13. IN THIS APPEAL, THE ASSESSEE HAS RAISED ONLY ON E GROUND AGAINST THE CONFIRMATION OF THE ADDITION ON ACCOUNT OF INTE REST INCOME OF RS.15,12,166/-. (IT WAS THE CASE OF THE ASSESSEE TH AT THERE WAS NO LEGAL OBLIGATION ON THE PURCHASER TO PAY SUCH INTEREST TO THE ASSESSEE AND THE SAID RECEIPT IS NOT IN THE NATURE OF INCOME LIABLE TO INCOME-TAX AND ALSO REGARDING LEVY OF INTEREST 234B AND 234C AT R S.29,98,785/- AND RS.6,437/- RESPECTIVELY.) ITA NOS.789/B/11 & 246/B/12 8 14. THE BRIEF FACTS RELATING TO THIS GROUND ARE THA T THE ASSESSEE HAS SOLD CERTAIN LAND TO M/S SUSRUTA VISHRANTHI DHAMA PVT. LTD. FROM THE PURCHASER. IT WAS OBSERVED BY THE AO DURING THE AS SESSMENT PROCEEDINGS THAT THE ASSESSEE HAS RECEIVED INTEREST OF RS.15,12,166/-. AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE A ND ALSO THE AGREEMENT OF SALE BETWEEN THE PARTIES, THE AO OBSER VED THAT IN THE CASE OF ANY DEFAULT ON THE PART OF THE VENDOR HE SH OULD REFUND THE TOTAL MONEY RECEIVED FAILING WHICH THE SUM SHALL CARRY AN INTEREST OF 18% P.A TILL PAYMENT. THUS OBSERVING AO HELD THAT THE ASSESSEE WAS BEING COMPENSATED BY THE VENDOR BY A PAYMENT OF INTEREST AND THIS AMOUNT IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S. HE ACCORDINGLY BROUGHT IT TO TAX. ON APPEAL, THE CIT(A) CONFIRMED THE ADDITION AND THE ASSESSEE IS IN APPEAL BEFORE US. 15. THE LEARNED COUNSEL FOR THE ASSESSEE FILED A CO PY OF THE AGREEMENT OF SALE BEFORE US AND SUBMITTED THAT AS P ER CLAUSE 7 AND 8 OF THE SAID AGREEMENT, THE OBLIGATION IS ONLY ON TH E VENDOR TO COMPENSATE THE VENDEE AND THERE IS NO CLAUSE OR AN Y OBLIGATION ON THE PART OF THE PURCHASER TO COMPENSATE THE ASSESSEE FO R ANY DELAY IN PAYMENT OF THE SALE CONSIDERATION. HE SUBMITTED THA T AS THERE WAS A DELAY IN PAYING THE ENTIRE SALE CONSIDERATION AND G ETTING THE PROPERTY ITA NOS.789/B/11 & 246/B/12 9 REGISTERED, THE PURCHASER GRATUITOUSLY HAS PAID TH E SAID AMOUNT, WHICH IS IN THE NATURE OF A CAPITAL RECEIPT NOT CHA RGEABLE TO TAX. HE ALSO PLACED RELIANCE UPON THE DECISION OF THE APEX COURT IN THE CASE OF PADMARAJE R KADAMBANDE VS. CIT REPORTED IN 195 ITR 877 IN SUPPORT OF THE ABOVE PROPOSITION. 16. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND DREW OUR PARTICULAR ATTENTION TO THE ASSESSMENT ORDER AT PARA 6 AND 7 WHERE THE AO HAS OBSERVED THA T THE AGREEMENT OF SALE PROVIDES FOR SUCH A CLAUSE. 17. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS, WE FIND THAT THE ONLY CLAUSES RELATING TO COMPENSATING THE OTHER PARTY ON ACCOUNT OF ANY DEFAULT ON THE PART O F THE VENDOR ARE CLAUSES 7 AND 8 OF THE AGREEMENT OF SALE. FOR THE S AKE OF CONVENIENCE THEY ARE REPRODUCED HEREUNDER : 7. THAT IF GOOD AND MARKETABLE TITLE IS NOT MADE OUT WITHIN THE STIPULATED PERIOD OR IF THE PROPERTY IS SUBJECT TO ANY SCHEME OR ACQUISITION OR REQUISITION OR FOR ANY REASON CANNOT BE ALIENATED BY VIRTUE OF ANY CENTRAL OR STATE ACT OR FOR WANT OF NO OBJECTION BE ING ITA NOS.789/B/11 & 246/B/12 10 ISSUED BY ANY AUTHORITIES ETC, THE PURCHASER SHALL BE AT LIBERTY TO RESCIND THIS AGREEMENT AND THE VENDOR SH ALL IN THAT EVENT AND ON DEMAND BY THE PURCHASER REFUND FORTHWITH THE TOTAL MONEY RECEIVED AS ON SUCH DATE FAILING WHICH IT SHALL CARRY INTEREST AT 10% PER AN NUM TILL PAYMENT. 8. THAT IF THE VENDOR FAILS AND/OR NEGLECTS TO COMPLETE THE SALE AFTER THE TITLE BEING MADE OUT AS AFORESAID OR OTHERWISE FAILS TO CARRYOUT ANY ONE OR MORE OF THE OBLIGATIONS ON HIS PART AS HEREIN PROVIDED O R OTHERWISE REQUIRED BY LAW, THE PURCHASER (EMPHASIS PROVIDE BY US) WOULD BE AT LIBERTY TO ENFORCE SPECI FIC PERFORMANCE OF THIS AGREEMENT BY INSTITUTION OF LEG AL PROCEEDINGS AND/OR AT ITS OPTION MAY SUE FOR RECOVE RY OF THE MONEY PAID AS ON THAT DATE WITH INTEREST AT 18% P.A COSTS, DAMAGES AND OTHER RELIEFS. 18. FROM A LITERAL READING OF THE ABOVE CLAUSES, IT IS SEEN THAT THE OBLIGATION WAS CAST ONLY UPON THE VENDOR AND THERE IS NO OBLIGATION ON THE PURCHASER TO COMPENSATE THE VENDOR. THEREFORE AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE T HERE IS NO LEGAL OBLIGATION ON THE PART OF THE PURCHASER TO COMPENS ATE THE SELLER FOR ANY DELAY OR DEFAULT ON THE PART OF THE PURCHASER I N MAKING THE PAYMENT AND IF THE PURCHASER WILLINGLY AND GRATUITO USLY MAKES THE ITA NOS.789/B/11 & 246/B/12 11 PAYMENT TO THE VENDOR THEN IT IS IN FACT A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. THIS ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PADMARAJI R KADAMBANDE (CITED SUPRA). 19. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT T HE AMOUNT OF RS.15,12,166/- RECEIVED BY THE ASSESSEE FROM THE PU RCHASER IN ADDITION TO THE SALE CONSIDERATION CANNOT BE TREATE D AS INTEREST INCOME AND IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. 20. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASS ESSEE IS ALLOWED. INTEREST U/S 234B AND 234C BEING CONSEQUENTIAL IN N ATURE NOT CHARGEABLE AND WE HOLD THAT THE SAME IS NOT LEVIABL E. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOV, 2012. SD/- SD/- (JASON P BOAZ) (MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 30/11/2012 ITA NOS.789/B/11 & 246/B/12 12 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER + SR. PRIVATE SECRET ARY, ITAT, BANGALORE.